A COMPARATIVE ANALYSIS OF RELATIONSHIP BETWEEN RENTAL RESIDENTIAL AND COMMERCIAL PROPERTIES IN NIGERIA

A COMPARATIVE ANALYSIS OF RELATIONSHIP BETWEEN RENTAL RESIDENTIAL AND COMMERCIAL PROPERTIES IN NIGERIA

Background of the study

A home is one of life's most fundamental need. This need can be met for an individual in one of two ways: either by occupying his own property as an owner's occupier or by renting a property from someone else. In our more traditional society, the primary means by which the requirement for a place to live is satisfied is the first alternative, which is owner occupation(Adegoke, 2022). The situation has evolved as a direct result of the crisis in the metropolitan centers. Due to the difficulties in acquiring land and the high cost of building construction, a large number of individuals are no longer in a position to own their own real estate. As a consequence of this, the only option that is available to them to fulfill their need for shelter is to lease space in the homes of other people. As a direct result of this, two distinct groups of urban residents have come into existence: the landlord and the tenant. According to the terms of this agreement, the tenant is responsible for providing the landlord with a certain sum of money in exchange for the use of the landlord's home. This amount is often referred to as the rent(Adegoke, 2022). At this time, when the focus is on investment performance analysis in many areas of the globe, it is extremely essential to evaluate the performance of real estate investments, whether residential or commercial. This is true for both types of real estate investments. This is of much greater significance in Nigeria, where very few research have been conducted on the extent of the returns that may be generated via investing in real estate. In addition, the effect of continuing shifts in the global and local economies on the success of real estate investments serves to underscore the need of giving this factor significant attention when making decisions about investments(Ajayi, 2020). Since the 1990s, there has been an exponential increase in the demand for retail and commercial outlets across the country's most populous urban centers. This is due to the fact that the economic downturn forced those who were previously jobless as well as those working in the public sector to consider engaging in trade activities in addition to their regular occupations. The response of the investors to this turn of events has been to expand the number of retail and commercial outlets while decreasing the number of residential property constructions. As a consequence of this, open areas that are located in close proximity to public institutions in numerous towns and cities throughout Nigeria have been unreasonably built to accommodate stores and other retail enterprises(Amidu, 2022). The problem is made even more complicated by the widespread belief, held many Nigerian property investors, that investing in commercial property yields higher returns than investment in residential property does. However, investors can no longer rely their decisions on an intuitive comprehension of the market, which Bello, (2021) judged to be an unsatisfactory strategy for achieving success in property projects. Many landed properties in the metropolitan districts of the old Eastern Region of Nigeria, including Enugu, were destroyed during the Nigerian civil war that took place from 1966 to 1970. As a direct result of this, there was a significant reduction in the availability of landed holdings following the war. In addition, in the years after the end of the civil war, there was an enormous influx of people from rural areas into urban centers. This was a direct result of the extraordinary economic growth that the oil boom brought to the metropolitan areas. As a consequence of this, there was an increased level of demand for the restricted amount of landed properties that was already available. As a direct result of these factors, the monthly rent for landed properties rose significantly.

Because to the persistence of this pattern, "the typical worker now spends between 30 and 40 percent of his wage on rent." [Citation needed] (Brueggman, 2021). As a result, the variance in rent on properties is a direct result of the rise in rent that has been applied to the properties.

Rents in urban areas tend to vary according on the sort of commercial and residential uses that may be accommodated by a given property. This is because some properties in metropolitan areas provide advantages in terms of location over others, such as a more desirable prime location.

1.2 STATEMENT OF PROBLEM

Location of economic properties has been a difficult concept to understand. Although the primary objective of commercial properties is the derivation of financial gains, while that of residential properties is for habitation, shelter and comfort, the demand for land is a refection of the profitability or utility derivable from it use. The greater the benefit to be obtained from a particular use, the higher the rent that the user will be willing to pay for it.

There appear to be wide ranging differences in the levels of rent passing on residential and commercial properties in Enugu and Nigeria generally.

This research is seeking among other things to find out the causes of rental variation in commercial and residential properties in Nigeria, Ogui New Layout as a case study.

1.3 PURPOSE OF THE STUDY

The main purpose of this research is to carry out a comparative analysis of relationship between rental residential and commercial properties in Nigeria with a view to provide tool to be used in catching issues related to rent on these properties in Enugu and Nigeria generally.

In order to achieve the standard goals, the following objective are to be undertaken;

i) To identify the current level of rents for commercial and residential properties in the study area.

ii) To ascertain and examine the factors influencing the rents being commanded by these properties.

iii) To specify the implications of rental variation on decisions to acquire those properties.

iv) To determine the trend in rental values for residential and commercial properties in the study area.

1.4 RESEARCH HYPOTHESES

To aid the completion of the study, the following research hypotheses were formulated by the researcher;

H0: the level and price of rent on commercial property in the study area is high

H1: the level and price of rent on commercial property in the study area is low

H02: the trend of residential and rental property in the study area is high

H2: the trend of residential and rental property in the study area is low

1.5 SIGNIFICANCE OF THE STUDY

The finding of this study will be of benefit to the following;

Firstly, tenants who are charged rents based on different reasons, especially when the properties are of the same nature (physically). This will again enable the investors not only to understand how occupier thinks, but also why and the things they consider before acquiring properties for certain uses. For example residential and commercial use.

Secondly, the generality of the public can now understand the reason why the rents being commanded by these properties have to differ.

Lastly, this research work will help to determine the factors influencing, commercial and residential properties which is an essential pre-requisite to successful development as well as stimulating interest in the students to carryout out further research on the topic.

1.6 SCOPE AND LIMITATION OF THE STUDY

The study covers a period of three years (2002 to 2004) and it is restricted to selected properties (Residential and commercial) comprising blocks of flat and tenements in Ogui New Layout, Enugu

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